Indirect costs (F&A)
Definition
Indirect costs, also called facilities and administrative (F&A) costs, are real institutional costs of research that cannot be charged to one project, such as buildings, utilities, libraries, and compliance offices. Funders reimburse them as a percentage of a grant's direct costs.
How it works
Indirect costs work as a rate applied to a base of direct costs. For federal awards, a university negotiates its rate with its cognizant agency (usually the Department of Health and Human Services or the Office of Naval Research), based on its actual costs. The rate is applied to modified total direct costs (MTDC), which exclude items such as equipment, tuition remission, patient care, and the portion of each subaward above a set threshold. Example: a project with $200,000 in MTDC at a 55% rate receives $110,000 in indirect costs on top of the direct costs.
Organizations without a current negotiated rate can use the federal de minimis rate instead. The 2024 Uniform Guidance revisions raised it from 10% to 15% of MTDC, effective October 1, 2024.
NIH indirect costs
NIH pays indirect costs at the institution's negotiated rate for most research grants. Some award types get a fixed 8% of modified total direct costs, including K awards, institutional training grants, and awards to foreign organizations, and individual NRSA fellowships such as F31 and F32 fellowships get none. In February 2025, NIH announced a 15% cap on indirect costs for all grants. Federal courts blocked it: a district court permanently barred the policy, the First Circuit affirmed in January 2026, and the government did not seek Supreme Court review. As of October 2026, NIH continues to pay negotiated rates.
Why it matters for research offices
Indirect cost recovery matters because it pays for the infrastructure that makes research possible, and unrecovered costs come out of the institution's own budget. Foundations often cap indirect costs at 10% to 15% or pay none, so a portfolio heavy in foundation funding needs institutional support. Research offices also have to get the base right: a misclassified expense can over- or under-recover F&A.
Indirect costs vs direct costs
Direct costs can be tied to one project with reasonable precision, while indirect costs support many projects at once. A postdoc's salary on a project is direct; the electricity for the building is indirect. Administrative salaries are normally indirect under the Uniform Guidance unless they are integral to the project and meet specific conditions.
Common mistakes
- Applying the federal negotiated rate to a foundation request for proposals that caps indirects.
- Using the on-campus rate for work done off campus, or the research rate for an instruction project.
- Leaving equipment or tuition in the base when it should be excluded.
Frequently asked questions
NIH pays each institution's federally negotiated indirect cost rate on most research grants, so there is no single NIH rate. Career development and training awards get 8%, and individual fellowships get none.
Federal courts blocked it. A district court permanently barred the February 2025 policy, the First Circuit affirmed in January 2026, and the government did not appeal further, so negotiated rates still apply as of October 2026.
The federal de minimis indirect cost rate is 15% of modified total direct costs, raised from 10% by the 2024 Uniform Guidance revisions effective October 1, 2024.